Question
A stock's returns have the following distribution: Demand for the Company's Products Probability of this Demand Occurring Rate of Return if this Demand Occurs Weak
A stock's returns have the following distribution:
Demand for the Company's Products | Probability of this Demand Occurring | Rate of Return if this Demand Occurs |
Weak | 0.1 | (24%) |
Below average | 0.1 | (12) |
Average | 0.4 | 13 |
Above average | 0.3 | 37 |
Strong | 0.1 | 63 |
1.0 |
Assume the risk-free rate is 2%. Calculate the stock's expected return, standard deviation, coefficient of variation, and Sharpe ratio. Do not round intermediate calculations. Round your answers to two decimal places.
Stock's expected return: %
Standard deviation: %
Coefficient of variation:
Sharpe ratio:
Suppose you held a diversified portfolio consisting of a $7,500 investment in each of 20 different common stocks. The portfolio's beta is 1.05. Now suppose you decided to sell one of the stocks in your portfolio with a beta of 1.0 for $7,500 and use the proceeds to buy another stock with a beta of 0.60. What would your portfolio's new beta be? Do not round intermediate calculations. Round your answer to two decimal places.
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